Opinion | Budget 2026 Is Not A Break From 2025, It’s A Reckoning

Budgets are often best understood not in isolation, but in sequence. Read together, Budget 2025 and Budget 2026 resemble two chapters of the same economic story — one driven by assertion, the other by adjustment. If Budget 2025 was about reinforcing confidence in India’s growth trajectory amid global uncertainty, Budget 2026 appears more concerned with managing the consequences of that confidence. The shift is subtle, but unmistakable: from expansion to consolidation, from promise to performance, and from political signalling to economic housekeeping. Budget 2025 had arrived with a sense of urgency. Global growth was fragile, private investment hesitant, and domestic demand uneven. The response then was clear and muscular. Public capital expenditure

was aggressively pushed as the central lever of growth, welfare spending was protected to cushion vulnerable households, and industrial policy was projected as a strategic response to global supply chain realignments. Budget 2026 inherits the outcomes of that approach — stronger infrastructure momentum, improved macro stability, and a more credible growth narrative — but also its constraints. The fiscal space is narrower, expectations are higher, and execution risks are harder to ignore. One of the most visible continuities between the two Budgets is the unwavering commitment to public investment. Budget 2025 treated capital expenditure as both stimulus and strategy, betting that infrastructure would crowd in private investment and create durable growth capacity. Budget 2026 does not reverse this bet, but it refines it. The emphasis shifts from expansion to efficiency, from announcing new corridors and projects to completing, integrating and monetising existing ones. This is a hit, not because it excites, but because it acknowledges a basic economic truth: returns to public investment depend as much on execution as on scale. Yet the miss lies in the absence of a clearer roadmap for transitioning from public-led growth to a more balanced investment cycle. Private capital has been invited repeatedly; Budget 2026 still stops short of explaining how that invitation turns into commitment. Fiscal discipline is where the contrast between the two Budgets sharpens most clearly. Budget 2025 had defended higher spending as a necessary trade-off in an uncertain world, confident that growth would eventually repair the balance sheet. Budget 2026, by contrast, reads like a document written with bond markets and rating agencies firmly in mind. The glide path to consolidation is reaffirmed, and expenditure choices appear more carefully rationed. This restraint is a hit in terms of credibility and long-term stability, especially at a time when many economies are struggling with debt overhangs. However, the accompanying miss is that fiscal consolidation is not paired with a strong enough narrative on how growth quality—jobs, wages and productivity—will compensate for tighter public spending. The treatment of consumption highlights this tension. Budget 2025 acknowledged weak demand conditions more openly, using welfare schemes, subsidies and targeted support as shock absorbers. Budget 2026 assumes that demand will recover organically as investment-led growth feeds into incomes. This assumption may prove optimistic. While tax rationalisation and targeted relief provide some support, the absence of a stronger push for broad-based consumption—especially in rural and lower-middle-income urban segments—remains a vulnerability. In choosing prudence over stimulus, Budget 2026 may have strengthened macro stability, but it risks underestimating the role of demand in sustaining growth momentum. Welfare policy offers another revealing comparison. Budget 2025 treated welfare as both economic insurance and political necessity, protecting major schemes even as fiscal pressures mounted. Budget 2026 does not dismantle this framework, but it tightens it. The focus shifts decisively towards targeting, digitisation and outcome-based delivery. This is a hit in theory, promising better efficiency and reduced leakages. In practice, however, it raises concerns about exclusion and administrative capacity. The miss here is not the intent, but the silence around grievance redressal and last-mile challenges, especially in a slowing or uneven economy. Industrial policy, once contentious, emerges as a point of continuity and maturation. Budget 2025 had doubled down on production-linked incentives and domestic manufacturing as a strategic priority. Budget 2026 keeps this architecture intact but subtly changes the tone—from attraction to accountability. Performance benchmarks, localisation and export outcomes receive greater emphasis. This evolution is a hit, signalling that industrial policy is no longer experimental but institutionalised. Yet the miss lies in the limited attention to small and medium-sized enterprises, which remain critical to employment generation but peripheral to headline industrial strategy. On reforms, the contrast is more muted but still telling. Budget 2025 leaned heavily on the narrative of past reforms bearing fruit, using macro resilience as validation. Budget 2026 is quieter, almost cautious, on new reform commitments. Ease of doing business, regulatory certainty and dispute resolution are addressed incrementally rather than ambitiously. This incrementalism is understandable in a complex political economy, but it also reflects a missed opportunity. With macro stability largely secured, Budget 2026 could have afforded to be bolder on second-generation reforms that directly affect productivity and competitiveness. Perhaps the most important difference between the two Budgets lies in their underlying assumptions about risk. Budget 2025 was framed in a world where uncertainty was external—global inflation, geopolitical shocks, supply disruptions. Budget 2026 implicitly recognises that many risks are now internal: execution capacity, fiscal sustainability, climate stress and employment quality. The increased attention to green transition, energy security and logistics efficiency is a hit, even if climate finance remains underdeveloped as a coherent strategy. The miss is that labour markets—arguably the most critical variable for inclusive growth—remain addressed largely through skilling narratives rather than structural reform or social protection. Taken together, Budget 2026 feels less like a fresh vision and more like a course correction. It consolidates the gains of Budget 2025 while acknowledging, quietly, that ambition must now be matched with arithmetic. This makes it a more credible Budget, but also a less inspiring one. The challenge for policymakers is that credibility alone does not generate momentum; it merely preserves it. In the end, the comparison between Budget 2025 and Budget 2026 reveals an economy in transition. The era of aggressive state-led push has not ended, but it is being recalibrated. The promise of high growth remains, but it is now accompanied by an awareness of limits. Whether this balance produces sustained, inclusive growth will depend not on what was announced in either Budget, but on what is delivered between them.

Dr Megha Jain is Assistant Professor, Shyam Lal College, University of Delhi and Sr VF, Pahle India Foundation. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views